The Kaiser-Francis Oil Company is like other Oklahoma energy empires in many ways. It’s been created by entrepreneurs who pulled themselves up by the bootstraps. It’s ruled by a billionaire CEO who has weather storms of controversy and showers of praise, but the Tulsa-based exploration and production company is different. It isn’t pushing for oil and gas tax cuts according to a recent article from StateImpact Oklahoma.
Don Millican is the CFO of Kaiser-Francis. He doesn’t think the state tax credit for horizontal drilling actually increases in-state activity.
Millican says the state incentives might increase an oil company’s profits, but the gross production taxes have little effect on where, geographically, an oil company chooses to drill.
“I guess the best evidence of that is the drilling boom that’s taking place in North Dakota, where they have an 11.5 percent severance tax,” he says. “A 3 percent difference is not going to make the decision whether or not you drill in a given location.”
“It certainly is a benefit to the oil and gas industry to receive that reduced rate, but it isn’t causing a particular behavior,” he went on to say. “And if you’re going to have an incentive, it seems like it ought to cause a change in behavior.”
Millican also says another reason he’s not pushing the state oil and gas tax cuts is because it’s one of the few taxes Oklahoma oil companies actually pay.
“The energy industry doesn’t pay a lot of income tax because of the intangible drilling cost deduction,” Millican says. “And we don’t have an ad valorem tax on oil and gas wells, like Texas does. So what is going to be their contribution to the running of the state? Severance taxes, historically, has been how the oil and gas industry has helped contribute their part to the state. And as corporate citizens, they ought to be contributing their part.”
The horizontal drilling tax break expires at the end of the year. Oklahoma lawmakers are currently re-evaluating overall taxes on oil and gas production.
Here’s the rest of the story written by Joe Wertz for StateImpact Oklahoma.